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“The FTSE 100 trades slightly higher on Tuesday, continuing its impressive recovery from the recent lows seen in late March. Trading above the 7,500 mark, the index is back within striking distance of the record highs attained in January,” says AJ Bell Investment Director Russ Mould.
BP
“Oil company BP beating expectations on trading for the first three months of 2018 is particularly impressive given those expectations would likely have been elevated due to the recent strength in crude oil prices.
“BP’s adjusted net income of $2.59bn is the highest quarterly total since the oil crash in 2014 and ahead of analysts’ estimate for $2.12bn.
“The main negative in the numbers is cash flow performance which was dampened by continuing payments linked to the 2010 Gulf of Mexico oil spill, leading to higher debt.
“The market seems satisfied for now by assurances that this will represent the peak for outflows relating to the disaster but if this is not in evidence later in the year BP may be in for harsher treatment.”
Just Eat
“Online food ordering specialist Just Eat continues to have no problems in driving up revenue and order volumes, as illustrated by a strong first quarter update. The key issue remains how its move into delivering food will impact profit margins.
“Just Eat started a trial last year delivering food for a number of big chain restaurants. The relatively new boss Peter Plumb announced in March this year that the company would increase investment in delivery services, as well as spending more on brands and developing certain markets.
“Those spending plans worried investors, forced analysts to make large downgrades to their earnings forecasts for the 2018 financial year and prompted a big decline in its share price, which has only recently started to recover.
“Just Eat’s success has been helped by operating a high-margin business model. Investing heavily in a delivery network may change the company’s margin profile so the company will have to prove that its investment will lead to superior gains in the longer term.
“Competition is another factor to consider as Just Eat has many other players snapping at its heels, plus there is talk that many local restaurants are fed up of the extra costs associated with using its ordering platform and so are trying to run their own online services.”
National Grid
“Electricity and gas transmission utility National Grid is lining up the sale of its remaining 25% interest in UK gas distribution network Cadent Gas for £1.2bn.
“These funds should help shore up the balance sheet and could address potential concern over the dividend reflected in a near-6% yield.
“Historically National Grid has been seen as a particularly reliable source of income because it is relatively unaffected by movements in energy prices.
“It is paid a regulated price by energy suppliers based on the size of its asset base and not on the price or volume of electricity or gas.
“However, regulator Ofgem has proposed a drastic cut in the price grids can charge to run and maintain networks from 2021 onwards.”
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